The Supreme Court while deciding a batch of appeals has noted that the infusion of funds by the promoter in different projects is to be treated as interim finance regarding which total account is to be maintained by IRP (Interim Resolution Professional).

The two-Judge Bench of Justice Dinesh Maheshwari and Justice Sanjay Kumar observed, “Infusion of funds by the promoter in different projects is to be treated as interim finance, regarding which total account is to be maintained by IRP. If at the present stage, on the submissions of the appellants, CoC is ordered to be constituted for the corporate debtor as a whole in displacement of the directions of the Appellate Tribunal, it is likely to affect those ongoing projects and thereby cause immense hardship to the home buyers while throwing every project into a state of uncertainty.”

The Bench also observed that greater inconvenience is likely to be caused by passing any interim order of constitution of CoC (Committee of Creditors) in relation to the corporate debtor as a whole which may cause irreparable injury to the home buyers.

Advocate E.C. Agrawala appeared for the appellant while Advocates Dinesh Kumar Garg and R. Gopalkrishnan appeared for the respondents.

In this case, Union Bank of India and Indiabulls Asset Reconstruction Company Ltd. were the financial creditors of the corporate debtor. The NCLAT (National Company Law Appellate Tribunal) had admitted an application under Section 7 of the (IBC) Insolvency and Bankruptcy Code, 2016, and issued a slew of directions that practically had the effect of converting the corporate insolvency resolution process.

The “project-wise insolvency resolution process” inasmuch as the constitution of the CoC was restricted only to one project named “Eco Village-II” of the corporate debtor, who was dealing in real estate and had several ongoing projects. Another appeal preferred by Assets and Care Reconstruction Ltd., a beneficiary of corporate guarantee challenged the order of the NCLAT whereby it directed the IRP to call a meeting of only those financial institutions who had lent money to the corporate debtor before finalization of the term sheet.

The Supreme Court in the above context noted, “… we are not inclined to alter the directions in the order impugned as regards the projects other than Eco Village-II. … In relation to Eco Village-II project, since CoC was ordered to be constituted by the Appellate Tribunal in the impugned order dated 10.06.2022, we are not interfering with those directions too but, in our view, any process beyond voting on the resolution plan should not be undertaken without specific orders of this Court.”

The Court said that the impugned order is allowed to operate subject to the final orders to be passed in the appeals and subject, of course, to the modification in respect of the Eco Village-II project that the process beyond voting on the resolution plan shall await further orders.

“The interim direction dated 27.01.2023 by this Court in these matters is modified in the manner that the NCLAT may deal with the offers said to have been received and pass an appropriate order thereupon but, the entire process shall remain subject to the orders to be passed in these appeals. … As regards Civil Appeal No. 1975 of 2023, no interim relief or interim arrangement is considered requisite at the present stage”, noted the Court.

The Court clarified that other pending interlocutory applications are left open to be examined at an appropriate stage with liberty to the parties to mention if so advised and necessary.

Accordingly, the Court said that the appeals may be listed for a final hearing at the admission stage in the second week of July 2023.

Cause Title- Indiabulls Asset Reconstruction Company Limited v. Ram Kishore Arora & Ors.

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